Goldman's Stolper Speaks, Sees EUR Downside To 1.20: Time To Go All In
By now Zero Hedge readers know that there is no better contrarian signal in the world than Goldman's Tom Stolper: in fact it is well known his "predictions" are a gift from god (no pun intended ) because without fail the opposite of what he predicts happens - see here. 100% of the time. Which is why, following up on our previous post identifying the record short interest in the EUR and the possibility for CME shennanigans any second now, it was only logical that Stolper would come out, warning of further downside to the EURUSD (despite having a 1.45 target). To wit: "With considerable downside risk in the short term, within our regular 3-month forecasting horizon, the key questions are about the speed and magnitude of the initial sell-off. If we had to publish forecasts on a 1- and 2-month horizon, we could see EUR/$ reach 1.20. In other words, we expect the EUR/$ sell-off to continue for now as risk premia have to rise initially." In yet other words, if there is a clearer signal to go tactically long the EURUSD we do not know what it may be. We would set the initial target at 1.30 on the pair.
From Goldman
The thinking behind our EUR/$ forecast: When we last changed our FX forecasts in early December, we set our 3-month forecast in line with the spot rate at the time at 1.33. However, linked to the view of our European economists that the crisis will deepen initially before the situation improves, we signalled downside risks, potentially substantial, in the near term before bouncing back to the 3-month target. In terms of timing, the EUR/$ forecast path assumed that the Italian funding hump in February is the key event to watch and therefore the broad design of a comprehensive European policy response would become apparent during 1Q. Beyond that point, the gradual relaxation in Eurozone risk premia would then translate into better performance more broadly of risky assets. Given strong cross-asset correlations - and a risk premium in the EUR itself – this then would also be expected to help the Euro recover. Underlying broader USD weakness would help this move towards 1.45, our 12-month forecast. In that respect it is worth keeping in mind that, relative to the US, the Eurozone actually does address structural fiscal issues.
How are we doing with this forecast: So far, things have not deviated too much. There is some intensification in Eurozone fiscal concerns visible currently and the December summit left important issues unresolved, in particular on the enforcement side of better fiscal policy coordination in the Euro area. Italian bond yields and the trade-weighted EUR have duly responded, with the latter having lost about 3% since early December. The whole idea of markets forcing policymakers into action in our view means it is very likely that these trends will continue in the short term.
Macro changes we did not fully anticipate: Beyond the simple rise in risk premia, there have also been developments that suggest more broadly a downward shift in the expected EUR/$ trajectory. US growth has been more resilient and the ECB liquidity injection more forceful than thought in early December. At the margin, this has shifted the growth/monetary fiscal mix towards a deeper trough and a somewhat weaker subsequent rebound in EUR/$. Moreover, we see a risk of further substantial ECB balance sheet expansion in addition to the one already seen.
About the difficulties of forecasting a market-dependent policy move. A considerable complication when forecasting in the current environment is that we know we would look wrong at some point even if spot perfectly followed the expected trajectory. This is because a majority of market participants have to believe in a Eurozone blow-up, push asset prices lower and therefore trigger a policy response. We have seen this dynamic at work before and the difficulties of translating a market-conditional worse-before-it-gets-better view into a sensible forecast path.
How much lower how quickly? With considerable downside risk in the short term, within our regular 3-month forecasting horizon, the key questions are about the speed and magnitude of the initial sell-off. If we had to publish forecasts on a 1- and 2-month horizon, we could see EUR/$ reach 1.20. In other words, we expect the EUR/$ sell-off to continue for now as risk premia have to rise initially.
1.20 to 1.45 in less than a year? Inserted into our regular forecasts, such a gloomy short-term scenario would also imply a very substantial and steep rally later in the year. We are less sure about that assumption than we were, though the notion that EUR/$ rallies by 25 big figures in less than a year is more common than some often assume. In fact, we have seen quite a few similar moves in recent years, as the table below shows, and typically they have occurred faster than the recovery we currently project. On the other hand, as mentioned above, the marginal macro news on either side of the Atlantic suggests that the expected rebound may not necessarily live up to the more extreme scenarios of the recent past. In that respect, the risks to our current 6- and 12-month forecasts appear skewed toward a less extreme move this time.
Uncertainties about timing. One obvious risk is the exact timing when the point of deepest despair is reached. The Italian bond rollover in February is one obvious point, as mentioned above. But if the Italian government issues mainly short-dated bonds, the funding hump may actually be less of a challenge, in particular with ample ECB liquidity supply. The Greek PSI debate (March) or French elections (April/May) are other potential trigger events, well beyond the 1- or 2-month horizon. There is clearly a risk scenario where a comprehensive policy response may only become visible by the middle of the year. This would imply some clear downside risks to our 3-month forecasts as well and a delayed start to the subsequent Euro recovery. But things could be worse still, with our European economists arguing that an eventual break-up cannot be ruled out. All of this highlights the large uncertainties around any medium-term path when a wide range of outcomes is conceivable.
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Euro downside is $0.00.
doesn't the paper have a cent or so of value? Or for collectors? Or at least for playing monopoly!?
OK, you got me ... downside is $0.01. Haha.
looking into EWG and German automobile stocks....
Russians and Chinese love German luxury cars.
Chinese hate Japanese cars
Russians hate American cars
It has 12.45 BTU content.
I noticed that no stop/loss was indicated this time by that Stolper guy .... so he will be a hero no matter what happens even if we don't reach 1.20
This should have been placed in your 'friday humour' section
euro downside is ... 2 US dollars (Euro = Neu Deutsche Mark)
Neo Lira downside is 0,65 US dollars
The euro isn't just paper!
We also have euro coins which contain copper, nickle.... And all of these are commodities.
But for the rest of this article, I to believe the euro will keep going down even to 1.17 before it stabelizes. Pessimisme is to great here in europe and as in 2008 the construction and industry has just grinded to a halt this first week, even so much it's scarry.
The Euro is the Dollar for dummies, but it is still a Dollar.
The Fed will devalue the dollar to support the Euro. Any longs in DX just might feel the same pain as holders of the Swiss currency a few weeks back.
And why Euro is so bad and USD is so good? They don't want to print openly yet and the FED has printed few trillions already, that's the difference? So if they start printing we should expect euro/USD of about 2? Ridiculous
EU, they both are in serious trouble. The Euro is in bigger trouble because Europe is approaching their economic meltdown before the US. Euro = bad idea
I think US economy is in full melt down already. What US economy consist of?
About 1,000 words to say he don't know nuthin
If someone bet on heads-or-tails 100 times, and they were wrong 100 percent of the time, I suspect he knows something.
lol. oh yes, he knows what their prop desk are doing and advises the opposite ;)
In other words, the Euro will slip short term killing the longs. After a slight slip, everyone will short the Euro causing a massive short squeeze. After the short squeeze obliterates everyone, the Euro will hit a free fall.
Hmmmmm....
OT "So get your new Government Motors Chevy Volt today, and relive the good ol communist days! Folks, this is what the state-planned, government-run economy can deliver – if only you’ll just give it the chance."
http://notrickszone.com/2012/01/06/the-chevy-communist-trabant-gm-back-o...
That Trabant looks and sounds like a dumbed-down Volkswagen Beetle, even has the same steering wheel.
"Chevy Volt" will soon be know as the "Chevy Dolt" or "Chevy Jolt".
Memories of "Nova" (No va or "No go" in Spanish) and the exploding Ford Pinto.
Chevy and the Volt are crony capitalism and socialism hand-in-hand; united to plumb the depths of mediocrity and failure.
Who is John Gault?
How appropriate.
The Red Team hatred of the Chevy Volt is absurd. The Ford Pinto exploded in minor collisions and burned dozens alive. Ford literally decided not to recall it when the company decided the cost of settling lawsuits with the survivors of those killed would be less than the cost of the recall. The Ford Explorer prior to 2002 rolls over in a strong breeze. Hundreds live in wheelchairs due to design decisions made by Ford executives (overruling engineers) that were purely profit driven. I could go on. Where is your outrage for the victims of pure capitalism and greed? They Chevy Volt has killed exactly zero people. The hatred of this vehicle exemplifies ideology over substance.
There is no substance that's the problem Nancy. Who in their right mind is buying this overpriced vehicle. But do go on.
Fuck innovation. Let's all drive Hummers because our corporate masters say they are cool. Speaking of which, when I see a Hummer barely fitting down the road in Florida, shall I tell the driver that his choice of vehicle was incorrect?
You have a real chip on your shoulder. Was your mom a Gremlin or something?
Your mother was my mom's AMC Pacer.
Or could it be that the immense cost of the Volt over a similar priced compact car that gets 30mpg even at $3.50 a gallon would take over 30 years to make back the investment. I did an exhaustive cost breakdown of the Volt when the specs were announced. At $.10 a kilowatt hour, which is complete BS in most of the country, the cost to charge the Volt for 30 miles of range was around $2.85 based on the total electric draw to charge the battery. Some electricity is wasted as heat during the charging process. In areas like NYC and Boston is can cost upwards of $5.50 to charge a Volt for 30 miles of electric range, more than a gallon of gas for a 30 mile compact car. On extended range the Volt can get about 32mpg from the gas engine without running things like A/C, radio, headlights, etc. Using comforts drops that range extender below 30mpg. So what you have with the Volt is a $40k+ car that doesn't give you anything better than a $15k Hyundai would give you that gets 30mpg on gas and lets you drive 30 miles on electricity that costs about the same as a gallon of gas. There is no economic case to make to support the Volt.
All Volt owners, at that comeback, will tell you that they POWER their Volts only by windmills and that it's 70 degrees and sunny all the time...
Like... Like... The Altamonte Pass in California...
Thank you adr. I am so sick and f*&cking tired of hearing how they will make up the expense for an electric car by saving on gas. This shows the intelligence of the typical enviro-commie. They can't do basic math. An no, you are not saving the environment. Road to hell is paved with good intentions.
Go ahead and rave about an over-priced golf cart.
Nothing wrong with innovation or a fuel efficient vehicle.
The Chevy Volt is neither. Electric cars need electricity which in the U.S. is primarily generated by burning coal (*cough*).
Why they haven't come out with a diesel/electric hybrid is beyond me as a diesel is very efficient and has the torgue to run a generator more efficiently than a gasoline engine.
Truth be told most Amerikans don't want a little car that goes "clack-clack" and has exhuast that is black. How unsavory!
The problem with the Volt, as the author mentions, is that is built by a Government owned automaker, and it is the worst of breed of any electric.
A crony capitalism/socialism funded failure is symbolic of the decline of the nation and it's slide down the slippery slope to Eastern Germany and other planned (forced, oppresive) economies.
I keep seeing these ads about "Clean Coal", so I guess once that happens, no more problem, right?
I didn't realize coal plants are so inefficient. Per Wikipedia, about 33 percent. So you get 33 percent out at the coal-to-electricity stage, then you get about 90 percent of that into the battery, and then 80 percent of that into motor power from the car. At that point, you're about as efficient as a gasoline engine.
The only benefit would be that if there is an oil shortage for a short time, you could still charge your car without waiting in long lines. I suspect as more people use electric vehicles, the price would move to match that of gasoline / diesel so there would be no real savings advantage.
Diesel-electric would have the benefit of more efficiency, while still being dependant on imported crude oil, and a smaller percieved environmental benefit. Newer diesel engines with clean diesel fuel don't make black smoke and are quite quiet.
Nice repetition of the propoganda of your corporate masters. You do realize that Halliburton, Boeing, General Dynamics, GE, Lockheed, Ratheon, B.A.E. Systems, and many others, received billions last year from the U.S. taxpayer? How much exactly did we spend getting "Bin Laden"?
Why do you argue one injustice with another? One of the biggest complaints at ZH is crony capatilism. If the Pinto was such a bad design where was the DOT? Isn't this another one of your beloved government agencies put in place for our benefit? You slam the oil companies but fail fo mention Obama firing the GM president (back to the Volt) and then circumventing bankruptsy laws by putting unions ahead of bondholders for debt settlement. Talk about blatent catering to a voting block. What if Bush would have done something like that? I'm guessing your probably the type that loves Obama and can't stand Bush and can't see that both are the same animal.
Bottom line, unless the market picks winners and losers there will always be inefficiencies. And yes, rules are required but they must apply to all parties. Lady Justice must be blind.
And thus the argument evolves...
Person #1: I bought a Volt
Person #2: What an idiot
Person#1: You're a facist
Person #2: Points out all the technal inconsistencies & drawbacks & lays out an argument
Person #1: But those rules don't apply to me because I just so happen to live in a skittle shitting unicorn bubble
Person #2: OK, so assuming you do, you barely got to break even & probably overpaid
Person #1: Fuck you & go take a hike with your... Halliburton.......................Cheney..........................It's all Bush's fault............................. crony (we'll carefully avoid talking Solyndra here)....................... Cheney...................................Halliburton..................................Halliburton...................................
---
Full disclosure: I have a 1990 Ford pickup... It sucks on mileage (the gas part), but I also have it converted to run on propane by flipping a switch... If push came to shove, I'm sure it could be rigged with a wood gasifier, but I haven't gone there yet... In any case, it will still operate after an EMP... Spare parts are easy to find (& I have them stored)... I hardly drive it except to haul stuff... I have a EZ Go golf cart (electric) which gets me around the acerage... It only requires a full charge after about 20 miles... I have dedicated solar panels which can do SOME of that work... I have a 125cc Honda dirt bike as well...
I'm sure NOBODY gives a flying fuck about all of the above... They're personal choices...
Frankly... I think CNG is the best 'temporary option' that should be rolled out over the next 20 years or so as a way to get us moving in the right direction... But what I REALLY think is that people should stop fucking driving so much... Until everyone addresses consumption, there is NO technology that is really viable in the long run... If we don't do this, then NATURE will solve the problem for us by putting us back on horses & bicycles (which wouldn't be a bad thing either)... In fact, that's the method I'd prefer, which is why my stable of vehicles (above) represents the best I can afford to reduce my dependence on energy (yet still get work & tasks done relatively efficiently)...
I am jelous... dirtbike, go cart, multifulled truck. Sounds fun and productive. :)
"If push came to shove, I'm sure it could be rigged with a wood gasifier"
If push came to shove, wouldn't it be simpler to run it on methane (considering it's already rigged for propane)?
"In any case, it will still operate after an EMP..."
Is your truck a diesel with mechanical injection? If not, you'll have to switch to points...
Not bad, exept you forgot the part were Person #1 blast the oil companies because they're evil, nevermind the GM baliouts, Solyndra (sp) or the favors being give to GE. Not to mention the smug attitude now that they feel they're saving the planet.
+1 Good post. The problem (esp. for USA) is that the ecomonics of production & living are predicated upon the idea of distance being a small part of the overall cost. It isn't that we need a duplicate fuel, we need to use less fuel. The ludicrous electric vehicles so far produced, simply kick the gasoline can (a bit further) down the road.
Sounds like the roads in Florida are pucked up.
That's Flori-Duh!
(acknowledgements to Scott Adams)
Milton Friedman on the Pinto: http://www.youtube.com/watch?v=iPqdRqacpFk
Thank you for that perfect example of ideology over substance.
Milton is right, though. How much money should a car company spend to save an estimated one life a year?
EDIT: For clarity, I think concerns over Volt safety are extremely overblown, but that doesn't change the fundamental question of how much a car should cost versus it's safety rating, which is necessarily different for different people at different points in their life.
Narcissist.
Ah, I didn't realize you were a spoof account like MDB. My bad.
If you can support the supposition that $13/per car (or $40,000,000/yr stated differently) is the cost Ford SHOULD pay to make sure its vehicles are safe, than I can argue that Ford should instead send that money as food aid to Africa in leiu, because that will certainly save even more lives and hence I have a higher moral authority than you. I could argue that you are morally bankrupt if you choose to protect the 200 motorists over the starving children in africa because that is a better use of resources. How's that for substance?
And we should stop spending money on lead shielding for nuclear plants. Just move further away. Narcissist.
Yah and why don't you be the arbitrary allocator of resources? How many millions will starve when you ineptly allocate resources incorrectly? Who is the true narcissist?
If you thought you would starve, you would care. You are sure you will not, so you do not care. Narcissist.
Starving people in Africa. Since when? Forever? Hmmm. We are caring about this in the context of U.S. vehicle safety?
The car company makes money by selling cars, not by feeding hungry people. It has an obligation to build cars that don't cause its users to die.
In your example of feeding the poor, how much money should the food producer spend to make sure the food is not contaminated with salmonella?
Or put another way, what percentage of its users should a producer of any good be allowed to kill? If a corporation is a person, isn't it commiting involuntary manslaughter everytime someone dies using its product due to defect (car example) or disease (food example)? What amount of negligence causing death should a person be allowed to get away with?
I was in a crash in the 90's, was driving a top heavy chevy one ton flatbed. Had a loaded fuel tank in the bed. I actually rolled the pick-up, but guess what? It was my fault, I hit a corner way to fast. We also owned a ford explorer, pulled our snow mobile trailer with it, they drove just fine compared to alot of car's or truck's.
I guess year's of running equipment, tractor's, back hoe's, track hoe's, truck's, dozer's etc. does help but I have also seen hundred's of people who do not belong on any equipment let alone drive they way they do. It is un-safe, I will agree with you on that point for sure.
"The Ford Explorer prior to 2002 rolls over in a strong breeze."
I don't know if you're a troll or a fool but I'll bite:
The Explorer is top-heavy just like *all* conventional SUV's and off-roaders; the benefits of its design are ground-clearance and load-carrying capability; the disadvantages are that it's complete shit for travelling at speeds in excess of 20mph (nothing new here).
The fiasco with Explorers in particular had little to do with their design (and even less to do with the Firestones that were also blamed); if you'd actually researched the issue you're speaking so blithely out of your ass about, you'd know this.
Explorers were flipping [more than other SUV's with similar designs] because dealerships were airing down their tires to below spec to improve ride comfort; this was causing greatly-increased sidewall flex which creates internal friction in the tire materials and can cause catastrophic tire failure. When that happens to the rear tire on a vehicle and the driver doesn't know not to hit the brakes, the rear end of the vehicle will literally try to pass the front... and of course, if you throw a high-centered vehicle into a spin (on all but the slipperiest surfaces), you're going to have a rollover.
Now, should high-centered vehicles certified for public roads be equipped with proper safety cages? Personally, I think that's a fucking no-brainer... but Ford isn't any guiltier than a lot of other manufacturers in that respect.
Screw the Volt. I want one of these:
http://www.williamsbigbud.com/big-bud-videos.html
Regards,
Cooter
I found a review of the Chevy Volt on a UK car site. It actually does very well. I was a bit stunned actually.
http://www.whatcar.com/car-reviews/chevrolet/volt-hatchback/summary/25938-5
But the oil companies and their "think tanks" and MSM spokespeople have told us all to hate it. The merit of the vehicle is not relevant.
The Volt is the most overpriced combustible piece of underpowered vehicle on the planet. Save yourself 30k, get an additional 2 MPG tank total, more room, and more HP. Buy an Elantra.
Go Red Team! Did you know that both Ford and GM recalled more than 100000 gas powered vehicles this year already due to fire hazard?
Did you know Ford and GM couldn't build a quality car even if they were given a few hundred billion dollars to try. Oh wait they were and they still can't. The Volt did burn down two people's homes. At least one guy built a firewalled garage becuase he knew electric cars could combust for no reason through experience.
Correction: The UAW couldn't build a quality car at an acceptable price if...etc
I love how the UAW is blamed for the idiocy of management. Ford engineers knew how to fix the Explorer and they gave specific recommendations. Ford management said no. Several billion dollars later, it's the Union's fault.
Cost was involved in the equation. Labor being a direct cost, there's that against your argument. But it is worse than that. Their work rules have slowed improvement at every step, at every point in space and time, for decades on end, and their armies living on fat retirements built on the graves and incomes of countless hapless GM/Chrysler/Ford car owners over those decades suck the life out of the shell of what's left. The UAW should be a case in point of any definition of the term "Dead Weight Loss." Oh, and they also helped, with their forced membership and dues and contribution to politics, to kill off freedom in this country via statist intervention, moral hazard, and generally corrupt and tyrannical methods anathema to this once great Republic's brave founding.
Let's hear the facts behind that. FYI, Ford killed dozens of police officers in Crown Vics that were prone to fire. Look it up. Then ask yourself why your ideology would allow you not to care about that in favor of being "right."
smiler03 - the review on the uk site you refer to is for a different car. Range anxiety - doncha love the term - is removed because the car being reviewed is the petrol hybrid, and not the all-electric the article is about.
Thanks for the correction :O)
Going Gault seems like a better option every day.
i reject your comments ebworthen...if you want to argue you can respond to me at......corvair.com
Ah yes, the Corvair.
My Dad had one.
Ralph Nader didn't care for it.
Not sure of the details but heard it was unsafe and not as good as the Volkswagen Beetle.
My Dad's favorite was his 1985 Volkswagen Rabbit Diesel made in Wolfsburg.
In 1987 it got 50 mpg easily, a great car.
If the European situation can't be fixed for real (which I doubt) we should see dollar/euro parity by the end of the year.
Can Greece possibly not default before then?
Can Italy avoid Greece and Portugal's fate in it's bonds?
Iffy.
this may be good for a short term technical rally - after all their stops are in a 2-5pct band i would guess
The EUR is due for a small technical rally and the $ is due for a small downward correction. This guy's timing is impeccable. There's a better chance it hits 1.35 before it hits 1.20.
1.35 you crazy right...haha that was funny...btw if i see 1.35, i would short the hell off that sucker...
The Italian 10 year this moment is at 7.129%.
You want a technical rally, you better get out there lending money to them at 6%. Interested?
i don't know about that this time. yeah, as ZH just posted, there could be a huge squeeze, but Greece is finally about to blow for real this time. now that their bailout has been pushed back 3 months (really, its forever) it seems unlikely they even survive thru March.
and Italy and Spain are getting very close to the edge now too - the near-firehose of LTRO and Fed swaps managed to provide a sugar high for all of about 2 weeks. what exactly is left apart from outright printing by the already-insolvent ECB or another Fed backdoor bailout, both of which would raise holy hell from Germany and Congress?
Greece is always about to blow for real, this time......yet they keep pouring concrete in the mouth of the geyser..........
true, but they're finally running out of band-aids because the doctors themselves are bleeding. short of eurobonds or the Fed buying their paper directly, what comes next that kicks the can a little further? i guess the swap lines can possibly get jacked another couple hundred billion, but even this latest $100B had political pressure mounting against it.
Concrete in the mouth makes a rough go of a blow.
up to a game of "parity"?
There are new rules...
I haven't been long euro in years but might have to now.
1. The debts are so large and economic growth and demographics so unfavorable that debts can never be repaid.
2. There will be downgrade after downgrade which makes the debts more difficult to service
3. Ther cannot be defaults without endangering the entire western financial system due to $707 trillion in derivatives.
4. Only possible solution is inflation so debts can be serviced. A coordinated intervention of cash that keeps this economic system staggering along for a few years and then the contradictions in the system will cause it to destroy itself with a concomitant global conflict.
Have a nice weekend, while you can.
the latter has little to do with the first - the latter is the nature and purpose of a ponzi scheme.
The Euro tsunami is coming from the East. Hungary has already shown a willingness to say 'screw you' by refusing to sell bonds at market rates. The screw-ypu mentality is dangerous when a ship is sinking. The apple cart is very very rickety
mmmmmmmmmmmmmm.... Applesauce!
They don't use Euro's. Are you talking about Euros or EU? BTW Hungary is much smaller than California apple cart.
There is a way how the EUR would go up shortterm......
.....but it doesn't have to do with europe :)
well they do put a gold colored ring around some euro coins. If its brass it might have some salvage value.
Stolpered again. Commercials are short-long USD 56000:6000 right now, and they've been on the right side of this trade most of the time (wonder why?). More contrarian indicators from GS.